The company’s lotteries division has made a strong start to the first quarter and UBS notes a 30% price rise has defied historical precedents, in both the quantum and the elasticities of demand from the change. The broker estimates first half lottery revenue is currently on track to achieve 12% revenue growth.
UBS upgrades FY19 estimates for earnings per share by 2%. Analysis suggests the lotteries revenue, up 35% year-on-year, is driven primarily by Powerball with the remainder of the games broadly flat.
The positive impact from changes to the game, more jackpots, and a significant price change begs the question as to how the lotteries business will be managed moving forward and what other growth opportunities might be tested.
Ultimately, UBS believes the market should ascribe a higher multiple to the business because of the near-exclusive market in which it operates, and steady growth as well as low capital requirements. Buy rating and $5.30 target maintained.
Sector: Consumer Services.
Target price is $5.30.Current Price is $4.89. Difference: $0.41 – (brackets indicate current price is over target). If TAH meets the UBS target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).